How to manage your contracts logistically for logistics providers
In our recent article we looked at the priorities of contract managers working for logistics providers. These priorities included safety, security, quality and speed of delivery, satisfying customers and profit. We also considered some of the contracts used in the logistics context and tips for managing them. We continue in this article with further tips for logistics organizations dealing with contracts and in particular in relation to:
- Contracts for products or services used by the company;
- Employee and Contractor Agreements and Workplace Policies; and
- Insurance Agreements.
Contracts for products or services used by the company
Common contracts for services are those between shippers, brokers and carriers. Some things to keep in mind with these contracts include the following:
For shippers - Make sure your brokers are not double-brokering your freight so you don't lose track of your product. Also ensure the carriers used by your brokers meet safety standards and insurance minimums. Similarly, make sure you request contract information from brokers so you can identify who is moving your freight. Further, ensure your contracts stipulate who is responsible for any damage that occurs during transit.
For brokers - Make sure your shipper clearly understands the relationship between them and the carrier i.e. they are aware they may be responsible for costs incurred by the carrier that may be unforeseen. Also, ensure your carriers hold the required level of insurance, have a good safety record and safety score and understand payment terms and schedules.
Also shippers, brokers and carriers should all ensure that all organizations with which they contract are solvent by performing credit checks.
Following these tips will reduce risk of losses caused by unforeseen events and improve security and quality of delivery. It may also add to the speed of delivery, more satisfied customers and in so doing greater profits for your company.
Jan Runge Petersen and Maurits Speksnijder, both experts in logistics contract management, suggest that in relation to engaging other companies for goods and services required by your company, it is important to choose providers that have the same standards and values as your own company (http://ow.ly/4mWPHO). They recommend identifying those values which are needed in order to outperform the competition and best satisfy customers and adding these to your services contract. Aligning strategy in this way will contribute to the smooth running of the contracts and in so doing adding to the quality and speed of delivery, the satisfaction of customers and profits for your company.
Another tip provided by Runge Petersen and Speksnijder is to ensure you can exit a services agreement easily when required by including a clause in the services agreement that makes the process for termination clear. This is to ensure your company does not lose out on satisfying customers due to a lack of quality and speed of delivery, compromise on safety and security and lose profits due to a poor provider of goods and/or services.
An advanced negotiation and contract management system should allow you to capture data that can be leveraged to help make business decisions about who to contract with in the future for products or services. For example, you can record how long it takes to negotiate with certain providers and how many times they amend draft agreements and how often they meet the delivery timelines. These contract systems may use machine learning so that in the future you will be able to make decisions based on your past data for, what is known as Predictive AgreementTM. This may lead to increased efficiencies and speed of delivery and in so doing increased profits for your company.
Employee and Contractor Agreements and Workplace Policies
There may be a myriad of employee and contractors working in different capacities for your organization. Your workers may be working across various jurisdictions with different workplace laws. You will want to keep the number of templates upon which each of your contractor and employee agreements are based to a minimum. This will ensure your process for managing employees and contractors is most efficient. Efficiencies in your process could contribute to increase your company’s speed of delivery and, in so doing, its profit.
It may make sense for you to employ a contract management lifecycle system that allows for this i.e. makes it easy to build contracts based on the same template with different variations. This will cut down on errors in the document assembly process. For example, due to cutting and pasting incorrect clauses. It will also reduce the risk of damage to your company that such errors could cause.
For ensuring the safety of your employees and contractors, workplace policies may change from time to time to respond to and address incidents that have occurred in the workplace or changes to laws and regulations. Workplace policies will also need to be drafted, implemented and amended to ensure the highest level of security for all the works carried out by your company. For example, the political climate in a country where your company is carrying out a project may change. This may require the workplace policy relating to security to be updated e.g. a different transport route may need to be followed by transport providers.
You will do well to consider using a system that allows you to easily amend (and better yet, automate this process) workplace policies as necessary. You will also want one that allows these policies and amendments to be easily accessible to those affected by them so they can refer to them and review changes where necessary. You will also want a contract lifecycle management system that allows you to easily update all employee and contractor agreements easily to reflect these changes in policies.
Insurance agreements will need to be updated periodically to reflect changes in laws, circumstances relating to the goods and services provided by your company, changes in master services agreements and employee or contractor agreements. To do this more effectively, you should consider deploying a sophisticated contract management system that allows you to easily amend and negotiate for approval with relevant insurers when necessary. Such a system will contribute to the safety and security of your organization (by ensuring coverage of risks), quality and speed of delivery or your company’s products and services (by ensuring if an adverse incident occurs it can be easily attended to and addressed due to insurance coverage) and in doing so increase the protections for your organization.
So there you have some tips for contracting in logistics.
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